The average U.S. rate on a 30-year fixed mortgage fell below 5 percent this week for the first time on record as a government program to buy mortgage-backed bonds lowered borrowing costs.
The fixed rate dropped to 4.96 percent from 5.01 percent a week earlier, Freddie Mac said in a report yesterday. That's the lowest in data that go back to 1971, according to the McLean, Va.-based mortgage buyer.
The 15-year fixed-rate mortgage averaged 4.65 percent, up from 4.62 percent, Freddie Mac said. One-year adjustable rate mortgages, or ARMs, fell slightly in the week to an average of 4.89 percent from 4.95 percent last week.
The Federal Reserve last week started buying $500 billion of mortgage-backed securities to boost prices for mortgage bonds in the hopes that lenders will reduce the interest rates they charge.
No matter how low the rates go, it won't help homeowners who have lost their jobs or seen the value of their property tumble, said Brian Bethune, chief U.S. financial economist at IHS Global Insight Inc. in Lexington, Mass. "The Fed is arm-twisting to get rates lower, but we're 2 million jobs fewer than we were in July and we've seen home prices continue to fall, so we're in a bigger hole," Mr. Bethune said.
Mortgage applications in the United States rose last week to the highest level in more than five years, led by a surge in refinancing as interest rates fell to a record low.
The Mortgage Bankers Association's index gained 16 percent to 1,324.8 for the week ended Jan. 9, the highest level since July, 2003. The group's refinancing gauge jumped 26 percent, and the purchase measure fell 14 percent.
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